Gold Hit the Brakes Hardest Since 1981 on Warsh's 'Hawkish' US Fed

The PRICE of GOLD set its lowest London week-end price since mid-November on Friday as bond prices also fell again following the US Fed's "hawkish" no-change decision under new chairman Kevin Warsh.

Fixing at London's market-clearing 3pm auction around $4148 per troy ounce, the price of gold recorded its lowest Friday finish in 30 weeks, showing a gain of 28.4% from this day last June.

While that year-on-year rise has rallied from last week's drop to 22.6% − the smallest since mid-July 2024, hit on the price plunging towards $4000 following strong US inflation data − it contrasts with end-January's spike to 106.8%, the steepest annual gain since mid-October 1980.

Gold's New Year peak − hit the day before US President Trump named Warsh as his pick for Fed chair − has been followed by a deceleration in year-on-year gold gains of 77.8 percentage points, hitting the brakes hardest since the end of April 1981.

That was the month that, having cut overnight US interest rates from the highest in modern history, the Federal Reserve under Paul Volcker began hiking again, taking the cost of borrowing back up close to 20% per annum even while inflation on the Consumer Price Index continued to decline from 10.6%.

This week the US central bank held its Fed Funds rate at 3.63%, keeping US interest rates below the pace of CPI inflation, last put at a 3-year high of 4.0% for April.

"Financial markets are the most important source to guide central bankers," said new Fed chair Warsh when asked about the jump in US Treasury bond yield during his first post-decision press conference on Wednesday.

"I think financial markets react best," he went on, explaining his decision not to enter his own interest-rate forecast into the Fed's closely-watched 'dot plot' projections, "when they react to incoming data [rather than asking] how will the Federal Reserve react."

But the average forecast from Warsh's colleagues still showed what journalists and analysts call a "hawkish" rise to 3.8% for year-end 2026 rates, up from the 3.4% forecast since last September's meeting, as the new chairman stressed his commitment to squashing inflation back down to the Fed's long-term 2% target and the Dollar hit 13-month highs on the currency market.

With gold priced in Dollars down for the 3rd week running today, losing 0.9% from last Friday, the price of silver fell for the 6th week in a row, down 3.5% to set its lowest Friday midday auction price since mid-December below $65 per troy ounce.

Amid the rush to launch new gold trading products and clearing services led by the authorities in Hong Kong and Singapore, the Dubai Multi Commodities Centre (DMCC) today said it will launch a spot gold contract on Monday.

Billed as the Gulf region's "first-ever regulated spot gold T+0 contract," the DMCC's new product aims to meet the growing demand for "faster, more efficient, and more transparent ways to trade and settle physical gold [in] one of the world's leading hubs...handling significant bullion flows between East and West," says Chairman and CEO Ahmed Bin Sulayem.

London bullion market-member and US-listed broker StoneX is meantime looking to launch a retail bar and coin store in Singapore, expanding its StoneX Bullion subsidiary's current model of fulfilling orders from Frankfurt, Germany and putting itself "in prime position to capture the growing interest in physical precious metals and the corresponding demand for storage facilities" in the city-state.